BRANIFF AIRWAYS, INC. v. NEBRASKA STATE BOARD OF EQUALIZATION AND ASSESSMENT ET AL.

APPEAL FROM THE SUPREME COURT OF NEBRASKA.

No. 476. Argued March 12, 1954. Decided June 1, 1954.

Pursuant to a Nebraska tax statute, an apportioned ad valorem tax was levied on the flight equipment of appellant, an interstate air carrier. Appellant is not incorporated in Nebraska and does not have its principal place of business or "home port" in that State, but its aircraft make eighteen stops per day regularly in Nebraska and approximately one-tenth of appellant's revenue is derived from the pickup and discharge of Nebraska freight and passengers. Appellant challenged the validity of the tax under the Federal Constitution, but it did not challenge the reasonableness of the apportionment prescribed by the taxing statute or the application of the apportionment to its property. Held: Appellant's flight equipment is not immune from taxation by Nebraska for want of situs there or because regulation of air navigation by the Federal Government precludes such state taxation. Pp. 591–602.

1. Federal statutes governing air commerce enacted under the commerce power do not preclude the challenged tax. Pp. 594-597.

2. Appellant has not demonstrated that the Commerce Clause otherwise bars this tax as a burden on interstate commerce. Pp. 597-598.

3. Whether an instrumentality of commerce has tax situs in a state for the purpose of subjection to a property tax is a question of due process; and that question was sufficiently presented by appellant in this case. Pp. 598-599.

4. Eighteen stops per day by appellant's aircraft was sufficient contact with Nebraska to sustain that State's power to levy an apportioned ad valorem tax on such aircraft, even though the same aircraft do not land every day, and even though none of the aircraft is continuously within the State. Pp. 599–601.

5. The power of Nebraska to levy this tax is not affected by the fact that the original plaintiff in this case was domiciled in Delaware, through which its planes did not fly, and that appellant (with which the original plaintiff was merged) is domiciled in Oklahoma, through which the aircraft in question make regular flights. P. 601.

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Opinion of the Court.

6. Northwest Airlines v. Minnesota, 322 U. S. 292, does not preclude states other than those of the corporate domicile from taxing instrumentalities of interstate commerce on the apportionment basis in accordance with their use in the taxing state. Pp. 601-602.

157 Neb. 425, 59 N. W. 2d 746, affirmed.

William J. Hotz, Sr. argued the cause for appellant. With him on the brief were William J. Hotz, Jr. and Roger J. Whiteford.

C. C. Sheldon, Assistant Attorney General of Nebraska, argued the cause for appellees. With him on the brief was Clarence S. Beck, Attorney General.

MR. JUSTICE REED delivered the opinion of the Court. The question presented by this appeal from the Supreme Court of Nebraska is whether the Constitution bars the State of Nebraska from levying an apportioned ad valorem tax on the flight equipment of appellant, an interstate air carrier. Appellant is not incorporated in Nebraska and does not have its principal place of business or home port registered under the Civil Aeronautics Act, 52 Stat. 973, 977, 49 U. S. C. §§ 401-705, in that state. Such flight equipment is employed as a part of a system of interstate air commerce operating over fixed routes and landing on and departing from airports within Nebraska on regular schedules. Appellant does not challenge the reasonableness of the apportionment prescribed by the taxing statute or the application of such apportionment to its property. It contends only that its flight equipment used in interstate commerce is immune from taxation by Nebraska because without situs in that state and because regulation of air navigation by the Federal Government precludes such state taxation.

This petition for a declaratory judgment of the invalidity of §§ 77-1244 to 77-1250 of the state tax statute 1

1 Neb. Rev. Stat., 1943, § 77-1244 et seq.

1

Opinion of the Court.

347 U.S.

and an injunction against the collection of taxes assessed under such provisions for previous years was filed as an original action in the court below by Mid-Continent Airlines, Inc., and tried upon stipulated facts. Subsequent to filing, but before the decision, Mid-Continent and appellant were merged on August 1, 1952, and appellant was substituted as the party plaintiff. Mid-Continent had been incorporated in Delaware with its corporate place of business in Wilmington in that state, and Braniff is incorporated in Oklahoma and has its corporate place of business in Oklahoma City. Pursuant to the merger Mid-Continent's main executive offices were moved from Kansas City, Missouri, and merged with appellant's in Dallas, Texas. The number of regularly scheduled stops in Nebraska, fourteen per day at Omaha and four at Lincoln, was not affected by the merger.

The home port registered with the Civil Aeronautics Authority and the overhaul base for the aircraft in question is the Minneapolis-St. Paul Airport, Minnesota. All of the aircraft not undergoing overhaul fly regular schedules upon a circuit ranging from Minot, North Dakota, to New Orleans, Louisiana, with stops in fourteen states including Minnesota, Nebraska and Oklahoma. No stops were made in Delaware. The Nebraska stops are of short duration since utilized only for the discharge and loading of passengers, mail, express, and freight, and sometimes for refueling. Appellant neither owns nor maintains facilities for repairing, reconditioning, or storing its flight equipment in Nebraska, but rents depot space and hires other services as required. The Supreme Court of Nebraska made no distinction as to taxability between those years when no flights were made into the state of domicile (Delaware) and those when flights did enter the state of new domicile (Oklahoma). ·

It is stipulated that the tax in question is assessed only against regularly scheduled air carriers and is not applied

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Opinion of the Court.

to carriers who operate only intermittently in the state. The statute defines "flight equipment" as "aircraft fully equipped for flight," and provides that "any tax upon or measured by the value of flight equipment of air carriers incorporated or doing business in this state shall be assessed and collected by the Tax Commissioner." A formula is prescribed for arriving at the proportion of a carrier's flight equipment to be allocated to the state.*

The statute uses the allocation formula of the "proposed uniform statute to provide for an equitable method of state taxation of air carriers" adopted by the Council of State Governments upon the recommendation of the National Association of Tax Administrators in 1947.5 Use of a uniform allocation formula to apportion aircarrier taxes among the states follows the recommendation of the Civil Aeronautics Board in its report to Congress.

2 Id., § 77-1244 (3).

3 Id., 877-1245.

Ibid. This section provides that "The proportion of flight equipment allocated to this state for purposes of taxation shall be the arithmetical average of the following three ratios: (1) The ratio which the aircraft arrivals and departures within this state scheduled by such air carrier during the preceding calendar year bears to the total aircraft arrivals and departures within and without this state scheduled by such carrier during the same period; Provided, that in the case of nonscheduled operations all arrivals and departures shall be substituted for scheduled arrivals and departures; (2) the ratio which the revenue tons handled by such air carrier at airports within this state during the preceding calendar year bears to the total revenue tons handled by such carrier at airports within and without this state during the same period; and (3) the ratio which such air carrier's originating revenue within this state for the preceding calendar year bears to the total originating revenue of such carrier within and without this state for the same period."

,

* Resolutions, The Eighth General Assembly of the States, 20 State Government 95.

Multiple Taxation of Air Commerce, H. R. Doc. No. 141, 79th Cong., 1st Sess. Recommendations by various interested groups as to the proper method of apportionment are included in that report

Opinion of the Court.

347 U.S.

The Nebraska statute provides for reports, levy, and rate of tax by state average."

Required reports filed by Mid-Continent for 1950 show that about 9% of its revenue and 112% of the total system tonnage originated in Nebraska and about 9% of its total stops were made in that state. From these figures, using the statutory formula, the Tax Commissioner arrived at a valuation of $118,901 allocable to Nebraska, resulting in a tax of $4,280.44. Since Mid-Continent filed no return for 1951 the same valuation was used and an increased rate resulted in assessment of $4,518.29. The Supreme Court of Nebraska held the statute not violative of the Commerce Clause and dismissed appellant's petition.

Appellant argues that federal statutes governing air commerce enacted under the commerce power pre-empt the field of regulation of such air commerce and preclude this tax. Congress, by the Civil Aeronautics Act of 1938, 52 Stat. 973, 977, 1028, § 1107 (i) (3), 49 U. S. C. § 176 (a), enacted:

"The United States of America is declared to possess and exercise complete and exclusive national sovereignty in the air space above the United States, including the air space above all inland waters and the air space above those portions of the adjacent

and its appendices. See also Arditto, State and Local Taxation of Scheduled Local Airlines, 16 J. Air L. & Com. 162; Kassell, Interstate Cooperation and Airlines, 25 Taxes 302. Mr. Bulwinkle introduced bills in accordance with the recommendation of the C. A. B. report that the National Government should prescribe the method of state taxation of air carriers. The bills adopted the Council formula utilized by Nebraska. Neither was enacted. H. R. 3446, 79th Cong., 1st Sess.; H. R. 1241, 80th Cong., 1st Sess.

Neb. Rev. Stat., 1943, §§ 77-1247, 77-1249.

Mid-Continent Airlines, Inc. v. Nebraska State Board of Equalization and Assessment, 157 Neb. 425, 59 N. W. 2d 746.